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How does a decrease in oil production affect the world's economy?

Author

Listed:
  • Naohiko Yahaba

    (Asia-Japan Research Centre)

Abstract

The world's oil consumption has been increasing for more than a century with a few exceptions. However, there would be a possibility that the recent increase in oil consumption in developing countries such as China and India tighten the long term oil market. Since the exact amount of oil reserves is unknown, it is difficult to predict when the ultimate decrease in oil production will come. However, for the last two decades, the amount of oil consumption per year has surpassed the amount of oil reserves newly found. Therefore, the possibility of ultimate decrease in oil production may increase. This paper examines the impact of the decrease in oil production on major economies using a computable general equilibrium model. Under the simulations in this paper, the oil exporting economies increase their GDPs, the utilities and the terms of trade. The oil importing regions, especially in newly industrialised and developing regions, decrease their GDPs, utilities and the terms of trade. All industry sectors decrease their world output. Among industry sectors, oil industry affects most and the industry sectors which use large amount of oil such as petroleum industry and chemical industry decrease its outputs significantly.

Suggested Citation

  • Naohiko Yahaba, 2010. "How does a decrease in oil production affect the world's economy?," Energy Working Papers 22722, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:energy:22722
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    File URL: http://www.eaber.org/node/22722
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    oil consumption; oil reserves; oil shock;
    All these keywords.

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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